Minnesota has recently turned the corner after more than a decade of frequent budget deficits, and now has a $1.9 billion surplus. This creates an opportunity for additional progress towards a fairer tax system and broadly-shared economic prosperity.
But that’s not the path taken in the budget plan released today by the Minnesota House of Representatives. The plan includes a $2.3 billion tax target – that’s more than the available surplus. While the details of the budget plan are still to come, proposed severe cuts in services imply that fewer Minnesotans would have affordable health care, seniors and people with disabilities will go without services that enable them to live in the community, and we won’t invest in the workforce training that helps people get and keep good jobs.
Taxes: House leadership has proposed a $2.3 billion tax target, which they indicate would include about $2.0 billion for tax cuts and the impact of dedicating some existing tax revenues to transportation. This would come on top of significant tax cuts passed in 2014. That figure is simply unsustainable. Minnesota’s recent history demonstrates that when the state does too much tax cutting in good times, it makes the hard times worse when the next economic downturn comes along. This target not only makes it impossible to invest in Minnesota today, it also threatens the state’s ability to sustainably fund nursing homes, roads and bridges, and other critical services in the future.
Also concerning is that many of the tax cut proposals being discussed in the House would cut taxes only for the highest-income Minnesotans, reversing recent progress that has made Minnesota’s tax system more equitable.
Spending Cuts: The largest cuts are proposed for Health and Human Services – a net $1.1 billion. And in fact, cuts within this area will likely be even larger, as the House has promised to increase funding for nursing homes. With such a harsh target, it is unlikely that the House will provide funding for affordable child care or community services for Minnesotans with disabilities. Instead, we expect that this budget will mean working Minnesotans will lose affordable health care coverage. Cuts are also proposed in economic development and the environment.
New Spending and Budget Reserve: The targets include some modest higher general fund spending in some areas, primarily in E-12 Education and Transportation, which together total about $300 million. The targets also allocate an additional $100 million to the state’s budget reserve. This would bring the state’s “rainy day” funds to $1.4 billion of the suggested $2.2 billion target.
The House Ways and Means Committee held a hearing last week where many Minnesotans testified to the unmet needs still experienced in their communities. The economic recovery is beginning to take hold, but many of our neighbors are still struggling. Minnesota needs targeted investments and sustainable tax changes, but the targets released today indicate that the House holds a different vision for our state.
The Senate is expected to release their budget resolution and targets later this week.
This post was updated to reflect information discussed in the March 24 House Ways and Means hearing.